Morne Patterson - Investor Psychology: How Behavioural Economics Shapes Decisions in Uncertain Times
Leading financial institutions have found that psychological factors drive about 80% of investment decisions, especially when markets are volatile. Market outcomes largely depend on investor psychology, which often causes people to deviate from rational economic decisions. These behavioural patterns have become more important as global markets experience uncertainty and complexity. Research in behavioural finance shows how cognitive biases and emotions affect investment performance in all types of market conditions. Investors develop financial bias patterns through several ways - they become overconfident in their judgement, seek information that confirms their beliefs, and tend to follow the crowd. Understanding these psychological dynamics helps investors create better strategies to manage risk and optimise returns when markets become challenging. The Foundations of Behavioural Economics Richard Thaler and fellow economists introduced behavioural economics in the 1970s. They